TDF funds for defense projects raised 5x to Rs.50 Crore

The Technology Development Fund’s (TDF’s) limit of funding for innovative defense projects raised to Rs.50 crore per project, 5 times the present limit of Rs.10 crore.

The TDF scheme is managed by the Defence Research and Development Organisation (DRDO) which supports the indigenous development of components, products, systems, and technologies by micro, small and medium enterprises (MSMEs), and start-ups.

The TDF scheme provides a major fillip to the defense manufacturing sector by encouraging the industry to innovate and develop defense technologies in order to place India on a self-reliant trajectory. The scheme facilitates up to 90 percent of the total project cost and allows the industry to work in consortium with other industries/academia.

To facilitate increased funding for innovative TDF products, Finance Minister, Nirmala Sitharaman in the Union Budget for FY2022-23 has announced that 25 percent of the defense R&D budget will be reserved for private industry, start-ups, and academia. The enhanced funding is in line with the budget announcement and it will further boost the vision of ‘Aatmanirbharta’ (self-reliance) in defense. Till now, 56 projects have been sanctioned under the TDF scheme.

With the increase in funding limits, potent systems will get developed and bigger companies will get supported along with MSMEs. This will be a massive win-win for all. A clear procurement path after development will mean the industry can boldly invest in capabilities.

There are four schemes under which small defense firms can approach the Ministry of Defense for funding innovative projects: iDEX (Innovation for Defense Excellence); iDEX Prime; the TDF and Make II and Make III projects, the modalities of which are explained in the Defense Acquisition Policy of the 2021 (DAP-2021).

The TDF is focusing on the development of the products for the military, but also for other strategic industries such as the Indian Space Research Organisation (ISRO). As with iDEX products, an order to the prime developer benefits all the MSMEs that function in its supply chain. In the decade between 2009-2019, the TDF was allocated Rs.544 crore. iDEX is a smaller scheme, run by the military, which seeks innovative solutions for specified functional challenges that are encountered on the ground. It has a fund limit of Rs.1.5 crore.

The current funding levels under iDEX are insufficient to support cutting-edge innovation. It allows for the optimization of various systems, but not basic fundamental research. For funding projects involving basic research, an allocation of Rs.50 crore, which the Ministry of Defense has just allowed, would be required.

On March 25th, the Government of India told Parliament that it has provided iDEX with budgetary support of Rs.498 crore for the five years from 2021to 2026, with the objective of providing financial support to nearly 300 start-ups/MSMEs/individual innovators.